Vanita Kohli-Khandekar: Why can't media sellers consolidate?

Raj Nayak was called the “superman” of media advertising sales. If there was one person who could convince an advertiser to buy a block of television time or a spot of internet space, it was Mr Nayak. He headed ad sales at Star India, and then set up NDTV Media — an independent company that he owned along with Prannoy Roy’s NDTV. The idea was to bundle a whole lot of television channels, websites and anything else that came along and sell it to advertisers.

Last year, Mr Nayak set up Aidem Ventures to do the same on his own. Last week, he took over as CEO of Viacom18’s Colors. For now the future of Aidem is not clear.

This is, however, not about Aidem or Mr Nayak. This is about, arguably, the only serious independent attempt at consolidated media selling. In a market where more than three-fourths of all media buying is controlled by five agencies, such as Madison or GroupM, it would seem that consolidated media selling is the biggest business opportunity. Why then doesn’t it work?

At every forum, media owners complain about how powerful media agencies have become. India is now a media buyer’s dream market — it is fragmented on the selling side and consolidated on the buying side. More than 600 channels, hundreds of newspapers, websites and over 200 radio stations fight for a slice of a Rs 27,000 crore ad pie. As a result, ad rates, especially in television, have actually gone down in the last decade or so.

Ironically, this has taken place even as media consumers have multiplied. India is now one of the world’s largest television and print markets. Nevertheless, it continues to have one of the worst ad spend-to-GDP ratios among emerging economies. Media owners have simply not been able to squeeze enough value out of the audiences they deliver.

However, attempts at consolidating media selling – within companies and independently – have had largely disappointing results. Every media group that has attempted to sell cross-media or cross-brand solutions has eventually given up on it. Even alliances that attempted this – like the one between Hindustan Times and Mid Day or The Hindu and Eenadu – fell apart.

The only company that claims to have succeeded to some extent is The Times Group. It has been selling advertising “solutions” – putting together its newspapers, TV, radio and internet brands – for some years now. Upen Roop Rai, Director, Times Internet, however, declines to share numbers. The other instance where aggregated selling has worked is the “neutral” Mediascope Publicitas. It represents 300 print media brands – most of which are international – in India.

There are various reasons why aggregating media brands for ad sales doesn’t seem to work. There could be coordination issues. When you are selling airtime, column centimetres and page views together, there are always turf issues. There could be the problem of the absence of a common measure. Even in the US, where cost per thousand is more commonly used, consolidated selling hasn’t taken off.

The real reason, arguably, has to do with clout and brand power. Most media companies have just one or maybe two brands that are leaders by far — in a geography or an audience cluster. The India Today Group has many brands, but only two stand out: India Today and Aaj Tak. Dainik Jagran could have more than 200 editions, but in reality advertisers want probably four or five of the most powerful, indispensable ones. Star TV is still largely about Star Plus and Zee about Zee TV.

So, a media company may have a lot of brands, but usually only one or two dominate a geography or an audience so completely that an advertiser will pay a serious premium for it. It is difficult to imagine a company that owns or represents even half a dozen powerful media brands — say The Times of India, Star Plus, Sun TV or Dainik Jagran.

That kind of media clout worries regulators so most mature markets have caps on the share of voice a media brand can own. There are also restrictions on newspaper companies owning TV stations or vice versa, called cross-media caps. So regulation prevents a media company from having more than a couple of brands with a share that dominates. Funnily enough, similar domination from media buying agencies doesn’t seem to worry regulators anywhere in the world.

For now, the question of why consolidated media selling doesn’t take off remains.